The Relationship between Exchange Rate and Trade Balance: Empirical Evidence from Sri Lanka

• 발행기관: 한국유통과학회
• 저자명: Aboobucker FATHIMA THAHARA Kalideen FATHIMA RINOSHA Abdul Jawahir FATHIMA SHIFANIYA
• 간행물 정보: 『The Journal of Asian Finance, Economics and Business(JAFEB)』Vol. 8 No.5, 37~41쪽, 전체 5쪽
• 주제분류: 경제경영 > 경제학
• 파일형태: PDF
• 발행일자: 2021.05.30

영문 초록

This study aims to investigate the relationship between the exchange rate and Trade Balance. Trade Balance is used as the dependent variable, and the independent variables are Exchange Rate, Gross Domestic Product, and Inflation. Augmented Dickey-Fuller unit root test was adopted to test the stationary property of time series data, Auto Regressive Distributed Lag model was employed to find the long run and short-run relationship and long-run adjustment, Bound test approach, the unrestricted Error Correction Model and Granger Causality Test are used to analyze the data from 1977 to 2019. The research findings suggest that inflation has a positive impact on the trade balance in the short run. The exchange rate and the Gross Domestic Product have adverse effects on Trade balance in the long run. The coefficient of ER in the previous year is negative, and the coefficient of TB in the previous year is positive and significant. This is consistent with the J-Curve phenomenon, which states that devaluation may not improve trade balance in the immediate period, but will significantly impact the trade balance improvement in subsequent periods. Hence Marshall Lerner Condition exists in Sri Lanka.

목차

1. Introduction

2. Literature Review

3. Methodology

4. Results and Discussion

5. Conclusion

키워드

Exchange Rate Trade Balance Gross Domestic Product Marshall Lerner Condition Devaluation